(Reuters) -Elevance Health cut its full-year profit forecast on Thursday due to increased medical costs in its government-backed plans, becoming the latest health insurer to feel the pinch of persistently high demand for healthcare services.
Shares of the company slumped more than 13% in premarket trading and dragged down rivals, with Centene and CVS Health falling 7% and 3%, respectively.
Elevance and some other insurers have indicated that the costs associated with Medicaid plans are expected to be high this year, as an end of a pandemic-era policy has left them with more sick patients.
CEO Gail Boudreaux said the company was navigating “a dynamic operating environment and unprecedented challenges in the Medicaid business”. Medicaid members made up about 20% of the company’s total medical membership, as of Sept. 30.
Government-backed Medicaid insurance covers medical care costs for people with limited income. During the pandemic, insurers were required to keep the members enrolled. The policy was terminated last year and states began the process of determining if people were still eligible.
Elevance noted in July that it was seeing higher-than-expected number of patients who need more medical care sign up for its Medicaid plans.
Rival UnitedHealth said on Tuesday it expects pressure across its government-supported health insurance businesses and forecast 2025 profit below Wall Street estimates.
Elevance cut its adjusted profit forecast for 2024 to $33 per share from at least $37.20 projected earlier. Analysts were expecting a profit of $37.26 per share, according to data compiled by LSEG.
Its medical loss ratio — the percentage of premiums spent on medical care — deteriorated to 89.5% in the third quarter, from 86.8% reported a year earlier. Analysts expected 87.15%.
Elevance also missed Wall Street estimates for quarterly adjusted profit by $1.29 per share.
(Reporting by Bhanvi Satija and Sneha S K in Bengaluru; Editing by Shilpi Majumdar)
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